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Source: ONE News
When politicians are pushed on what their long term economic
strategy is, they have tended lately to revert to some well used
lines about how "the country needs to lift exports or grow its
tradeable sector".
Nothing particularly wrong with that... they are right, we
do.
Who could possibly disagree? That's why it's such a good thing for
politicians to say.
But just prattling on about how we want to boost exports is frankly
not enough anymore.
Not when the dollar is trading near US80 cents. Wanting to grow
exports is just a goal; it's not the same as a long term economic
strategy.
A strategy would contain some new ideas on how exactly we are going
to lift exports.
A strategy would explain how we are going to increase the exports
of high value non-commodity based goods and services in face of a
high dollar.
A strategy would say, how we can add value to our bulk commodity
exports and become a price setter rather than a price taker?
Of course, these are all questions New Zealand has been trying to
answer - with limited success - ever since Britain stopped taking
most of our exports and joined the EEC in the 1970s.
Now, to be fair, the National led government - like the last Labour
one - does commit a huge amount of resource to trying to boost
exports.
Free Trade
Free trade deals remain a priority, while the government agency New
Zealand Trade and Enterprise does a sterling job trying to
encourage and foster new export companies in New Zealand.
The private sector also provides huge support to exporters via
lobby groups like Business New Zealand.
And Kiwis are picking up the baton.
There are loads and loads of great up and coming New Zealand firms
that are now exporting to the world.
From dog food to engagement rings, I talk to them every week on NZI
Business and they are truly inspiring.
However for New Zealand to lift its living standards we need more
of them and we desperately need them to be much bigger in
scale.
Another 30 Fonterras was the number Professor Paul Callaghan said
we needed in his book Wool to Weta.
What's the problem?
So what's holding back all these great small to medium sized
exporters from becoming bigger ones?
It might be that we don't make enough of what the world wants at a
competitive price.
Perhaps we are simply not productive enough.
Or then again it might be that we have an overvalued dollar that
never gives them a chance to be competitive and really grow at a
fast pace.
With the kiwi now trading near US80 cents it seems pretty clear
that it's more the latter at the moment.
The problem is governments around the world are all trying to boost
exports.
And the big ones like China and the US are simply intervening and
weakening their currencies to make sure they are the winners.
New Zealand with a free floating exchange rate is powerless.
And once again, like the last time the dollar blew past US80 cents,
we just grin and bear it right?
Doable
Thankfully for our large commodity based exporters in dairy,
forestry and meat, this is actually doable.
Commodity prices are at record highs so the dollar's impact is
mitigated somewhat.
But for other manufacturing based exporters like Fisher &
Paykel Healthcare, Nuplex and Rakon - the very companies who are
aspiring to be the next Fonterra - it is going to be tough going if
the dollar stays above 80 for a long period of time.
And this is the point.
The dollar's rise penalises the very parts of the economy that we
need to foster. It curbs job growth in the high-tech high-skilled
areas of the economy.
That sectors which produce the types of jobs which will keep more
of our best and brightest in New Zealand. It's frustrating to say
the least.
Now I've seen the limitations of currency intervention by our
Reserve Bank and understand the orthodox arguments about why there
is no easy way to bring down the kiwi dollar in the face of a
weak
greenback.
Looking at it rationally I know there are no silver bullets.
But then the government was quite happy to step in and provide a
form of subsidy to the export film industry - which was clearly
suffering because of the high dollar.
So I'd be disappointed if Finance Minister Bill English, Reserve
Bank Governor Alan Bollard and Treasury's John Whitehead weren't at
the very least getting together right now to discuss the dollar and
what could theoretically be done.
Because if the kiwi heads for parity with the US, as some
economists are not ruling out, then our beloved export-led recovery
could become a fleeting memory.
